EML ANNOUNCES EBITDA UP 226% TO $9.96 MILLION IN FIRST...

23 February 2017 ASX Market Announcements Australian Securities Exchange Limited 20 Bridge Street SYDNEY NSW 2000 __________________________________________________________________________________________

EML ANNOUNCES EBITDA UP 226% TO $9.96 MILLION IN FIRST HALF 2017

__________________________________________________________________________________________

EML Payments Limited (ASX: EML) is pleased to release its First Half 2017 Financial Year Results, as attached to this announcement with its Appendix 4D. Highlights for the first half of FY2017 include:

Revenue – increased by 207% over the prior corresponding period to $32.4m. In line with our expanded international presence, 85% of revenues were generated offshore and 90% of revenues were recurring in nature (ie. excluding one-time establishment fees).

Gaming segment – the percentage of revenue derived from programs in the gaming segment was 7%, reflecting the diversity that now exists across our more than 850 programs in various sales segments in 13 countries.

Revenue growth – was largely organic in the First Half, driven by an increase in Gross Debit Volume (GDV) to $1.93 billion, an increase of 403% across all regions and sales segments. GDV is what we previously referred to as Total Dollars Loaded, but is the more accepted industry terminology globally. Given we ended the period with 11m active accounts, an increase of 389%, and a 168% increase in our Stored Value Balance to $392.8 million, the result reflected positively against all of our key operating metrics.

EBITDA – increased by 226% to AUD$9.96 million, with all regional business units contributing positive EBITDA to the Group results. Depreciation of Sterling relative to the Australian Dollar (circa 25%) lowered our EBITDA result in the First Half by $1.0m, which otherwise would have been $10.96m, with Revenue 7% higher at $34.6m versus our reported $32.4m.

Gross margins – improved by 1.5% to 78.4% and have shown stability at this level over the last several reporting periods.

Operating cash flow – increased significantly to $9.64m, versus $0.3m in the prior corresponding period. We were able to increase our investment in PayWith Worldwide LLC, a technology partner with whom we are working on multiple m-card projects, and still increase our cash on balance sheet by 18% to $31.8m, with all regions reporting positive operating cash flow.

Business development – a number of new business partnerships were announced that will be accretive in FY18 and beyond. The most significant of these is our entry into the Salary Packaging segment in Australia, a segment in which we are offering a differentiated product

with a strong customer value proposition. This will become a key vertical for our Australian business going forward, where we expect to initially support more than 120,000 cardholders with GDV of circa $700 million per annum.

Product strategy – we are pleased to advise that we signed our first Reloadable program in Canada, we have launched our first Reloadable program in the United States and the launch of our first Reloadable program in the United Kingdom with bet365 is imminent. We expect that by the end of September 2017, we will be supporting Reloadable and Non-Reloadable products in every country in which we operate, one of the fundamental objectives we had when undertaking our two acquisitions in Europe and North America. We have also focused heavily on the B2B Payments vertical in the United States, a vertical that is unique to that country, but one with significant long-term growth potential.

Please also refer to EML’s Investor Presentation lodged with the ASX today for more detailed information.

About EML EML Payments Limited, Store Financial Europe, Store Financial Canada and Store Financial USA have come together under one exciting new brand: EML. With payment solutions from EML, you will be empowered with more control, transparency and flexibility over your payment processes. Our combined portfolio offers innovative payment technology solutions for payouts, gifts, incentives and rewards, and supplier payments. Together, we issue mobile, virtual and physical card solutions to some of the largest corporate brands around the world, process billions of dollars in payments each year, and manage more than 800 programs across North America, Europe and Australia. Learn more at www.EMLpayments.com

For further information, please contact: Rod North, Managing Director Bourse Communications Pty Ltd T: (03) 9510 8309 M: 0408 670 706 E: [email protected]

http://www.emlpayments.com/

Rule 4.2A.3

Appendix 4D

Half year report

Half-Year ended 31 December 2016 Introduced 1/1/2003

Name of entity

EML Payments Limited

ABN or equivalent company

reference

93 104 757 904

1. Half year ended (current

period)

Half year ended (‘previous

corresponding period’)

31 December 2016 31 December 2015

2. Results for announcement to the market

Movement 31 December 2016 31 December 2015

A$’000 A$’000

2.1 Revenues & other income 207% 32,440 10,560

2.2 Profit/(Loss) from ordinary activities after tax

attributable to members 119% 1,384 633

2.3 Profit/(Loss) for the period attributable to

members 119% 1,384 633

Dividends (distributions) Amount per security Franked amount per

security

2.4 Final dividend (Preliminary final report only) N/A N/A

2.4 Interim dividend (Half yearly report only) N/A N/A

2.5 Record date for determining entitlements to the

dividend

N/A

2.6 Brief explanation of any of the figures in 2.1 to 2.4 necessary to enable the figures to be understood.

Refer to the review of operations report in the half year financial report.

3. NTA backing

As at

31 December 2016

$

As at

30 June 2016

$

Net tangible assets per security 1

0.23

0.16

1 Under the listing rules NTA Backing must be determined by deducting from total tangible assets all claims on those

assets ranking ahead of the ordinary securities (ie: all liabilities, preference shares, outside equity interest etc).

4. Control gained over entities having material effect

4.1 Name of entity (or group of entities)

N/A

4.2 Date of gain of control N/A

4.3 Consolidated profit/(loss) from ordinary activities after tax

of the controlled entity (or group of entities) since the date

in the current period on which control was acquired

N/A

4.3 Loss from ordinary activities after tax of the controlled

entity (or group of entities) for the whole of the previous

corresponding period

N/A

Loss of control of entities having material effect

4.1 Name of entity (or group of

entities)

N/A

4.2 Date of loss of control N/A

4.3 Consolidated profit (loss) from ordinary activities after tax of

the controlled entity (or group of entities) since the date in the

current period on which control was acquired

N/A

4.3 Profit (loss) from ordinary activities after tax of the controlled

entity (or group of entities) for the whole of the previous


N/A

5. Dividends / Distributions

Date the dividend (distribution) is payable N/A

Amount per security of foreign source dividend N/A

6. Total Dividends /Distributions

Ordinary securities N/A

Preference securities N/A

Dividend or distribution investment plans in operation:

N/A

The last date(s) for receipt of election notices for the

dividend or distribution reinvestment plans

N/A

7. Details of aggregate share of profits (losses) of associates and joint venture

entities Name of associate/joint venture: N/A

Holding in entity N/A

Group’s share of associates’ and joint venture

entities’:

Current period

$A'000

Previous


- $A'000

Profit (loss) from ordinary activities before tax

Income tax on ordinary activities

Profit (loss) from ordinary activities after tax

Extraordinary items net of tax

Net profit (loss)

Adjustments

Share of net profit (loss) of associates and joint

venture entities

N/A N/A

N/A N/A

N/A N/A

N/A N/A

N/A N/A

N/A N/A

8. Foreign Entities

Which set of accounting standards is used in compiling the report (e.g.

International Accounting Standards)

International Accounting

Standards

9. All Entities A description of Accounts subject to audit dispute or qualification: N/A

INTERIM FINANCIAL REPORT For the half year ended

31 December 2016

EML Payments Limited

Formerly Emerchants Limited

ABN 93 104 757 904

EML PAYMENTS LIMITED

2 EML Payments Limited Interim Financial Report to 31 December 2016

CORPORATE INFORMATION EML Payments Limited and Controlled Entities

ABN Directors

93 104 757 904 Peter Martin (Non-executive Chairman) Thomas Cregan (Managing Director and Chief Executive Officer) Tony Adcock (Non-executive Director) Robert Browning (Non-executive Director) David Liddy AM (Non-executive Director) John Toms (Non-executive Director)

Company

Secretary

Louise Bolger

Registered Office and Principal Place of Business Auditors

Level 2, 26 Commercial Road

Newstead QLD 4006 Telephone: (07) 3607 0100 Facsimile: (07) 3607 0111

Deloitte Touche Tohmatsu

Level 25, Riverside Centre, 123 Eagle Street Brisbane QLD 4000 Telephone: (07) 3308 7000 Facsimile: (07) 3308 7004

Bankers Share Register

Commonwealth Bank of Australia 240 Queen Street Brisbane, QLD 4000 Heritage Bank Limited (Heritage) 305 Queen Street Brisbane QLD 4000

Link Market Services Limited Level 15, 324 Queen Street Brisbane, QLD 4000 Telephone (within Australia): 1300 554 474 Facsimile: (02) 9287 0303

Website Securities Exchange Listing

www.emlpayments.com

EML Payments Limited is listed on the Australian Securities Exchange (ASX: EML)

http://www.emlpayments.com






TABLE OF CONTENTS

Directors’ Report 4

Auditor’s Independence Declaration 8

Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income 9

Condensed Consolidated Statement of Financial Position 10

Condensed Consolidated Statement of Cash Flows 11

Condensed Consolidated Statement of Changes in Equity 12

Notes to Condensed Consolidated Financial Statements 13

Independent Auditor’s Report 26


DIRECTORS’ REPORT Your Directors present their report on EML Payments Limited and its subsidiaries (the Group or

Company) for the half-year ended 31 December 2016. In order to comply with the provisions of the

Corporations Act 2001, the Directors report follows:

Directors

The names of the Directors of the Company during or since

the end of the half-year are:

• Peter Martin (Chairman)

• Robert Browning

• Tony Adcock

• Thomas Cregan

• David Liddy AM

• John Toms

The above named Directors held office during and since the

end of the half-year.

Review and results of operation

The six months ended 31 December 2016 (‘1HFY17’) is the

strongest financial result that the Company has yet

delivered, driven largely by organic growth in our

Australian, European and North American business units. It

is also the first reporting period in which the full

contribution from our North American acquisition is visible

in our results providing shareholders with a view of the

larger business and how we are positioning ourselves for

future growth in some of the largest prepaid debit markets

in the world.

The financial results of the Company have always been

driven by the performance of our key operating metrics,

including the Total Value of Dollar Loads or Gross Debit

Volume (‘GDV'), the number of Active Accounts on our

platform and the Stored Value balances that we retain.

Growth in GDV is indicative of growth in payments volumes

from existing programs and new programs that have

launched, which generate revenue streams including

transaction fees, processing fees, load fees, interchange

and breakage on non-reloadable cards. The number of

Active Accounts is important because it is indicative of the

growth in active cards across both new and existing

programs, which is an indicator of customer adoption and

usage and therefore a predictor of future revenues. Our

final key metric is our Stored Value balances, which

represent the funds held on behalf of our partners that

support our prepaid programs and generates the Company

interest revenue, albeit in Europe and North America those

revenues are immaterial given prevailing interest rates.

That said the Company is well positioned to take advantage

of any increase in interest rates in these regions over time.

For the 1HFY17, our performance in these areas was

significantly higher than over the prior corresponding period

(‘PCP’). Gross Debit Volume or GDV was $1.93 billion, an

increase of 403% over the PCP. Our number of Active

Accounts increased to 11.0 million, an increase of 389%

over the PCP and Stored Value Balances increased to

$392.8m, an increase of 168% over the PCP. In terms of

GDV concentration, our non-reloadable products (B2B

incentive cards in Australia and shopping mall gift cards)

loaded $438.0m or 23% of total GDV, with typically strong

seasonality in our shopping mall segment over the

Christmas holiday season. Re-loadable products, also

known internationally as General Purpose Re-loadable

(‘GPR’) generated $272.6m or 14% of total GDV and B2B

Virtual Payments in North America generated $1,219.5m or

63% of GDV.

Whilst in previous updates we have provided a revenue

metric per segment, we feel that as our business expands,

this becomes overly complex (given a difference in revenue

mix for each product and market specific variables such as

interchange that varies by region) and it provides

information to competitors that could be detrimental to our

growth prospects. On our total GDV of $1.93 billion dollars,

our revenue metric was 1.7% (i.e. revenue $32.4m) at a

78.4% gross margin. The revenue metric of 1.7% is related

to the emerging significance of B2B virtual payments in

North America, which generates a net share of interchange

income at +90% gross margin. As B2B virtual payments

generate interchange only, it is at a lower metric than our

Non-reloadable and GPR products, thus bringing the

average weighted number down to 1.7% across the entire

$1.93 billion of GDV.


In terms of Active Accounts, across both Non-reloadable and

GPR products we ended the half year with 11.0m accounts,

comprising 10.8m Non-reloadable and 0.2m GPR accounts,

which is reflective of the seasonality in our shopping mall

programs and the fact that we only issued GPR cards in

Australia. We expect the GPR account numbers to lift

significantly, as we continue to see organic growth in our

Australian gaming programs, we launch more than 100,000

accounts in the Australian salary packaging market in July

2017 and we launch GPR issuance in the United Kingdom,

Canada and the United States. The B2B Virtual payment

segment is not measurable by these same criteria so

customers in this segment are excluded from this calculation.

These are significant results and auger well for the

remainder of the FY17 financial year.

The first half also saw the Company sign new business

partnerships that will be important drivers of our future

growth, including a partnership with Caesars Entertainment

to enhance their “TR” Total Rewards re-loadable prepaid

loyalty program across their 50 Casino properties in the

United States, a partnership with McMillan Shakespeare

Limited in Australia for the provision of re-loadable salary

packaging cards and a number of B2B Virtual card

programs in the United States, particularly with WOW Cable

and Sprint Telecoms. When combined with the imminent

launch of our first re-loadable program in the United

Kingdom with bet365, we expect these programs alone to

generate a minimum of $1.0 billion in incremental GDV in

FY18, so we continue to win new business programs across

multiple geographies and product lines.

Importantly, whilst some new programs may experience a

delay in launch timings, or some programs are more

effectively launched and marketed by our partners relative

to others, we remain focused on growth that is 3 years out

versus 3 months out. As shareholders will see in our

investment presentation, subsequent to the end of the first

half we announced our first re-loadable program in the

Canadian gaming market with Sports Interaction, and we

have launched our first re-loadable program in the United

States with Lou LaRoe. By the start of the FY18 year we

expect to be offering non-reloadable and re-loadable

programs in Australia, Europe, Canada and the United

States of America. In the second half of the financial year

we will be focused on the launch of these new programs so

that they provide a springboard for that future growth.

Name Change

Following approval by shareholders at the Company AGM,

application was made to ASIC to rename Emerchants

Limited to EML Payments Limited. ASIC approval was

granted on 18 November 2016. We did this to ensure that

we had a consistent brand identity across all regions

irrespective of the products we are offering and to provide

clarity for customers that we service across multiple

countries and regions. The market reaction to the change

has been positive.

Financial review

The group reported an EBITDA of $9.96m for the first half,

an increase of 226% over the PCP, driven by a 207%

increase in Revenue to $32.4m, a 1.5% improvement in

gross margins to 78.4% and continued management of

costs within internal budgets. Whilst overheads have

increased substantially, the majority of those costs relate to

the inclusion of the North American business for the full six

months, with negligible if any increases in operating

overheads in our Australian and European operations. All

reporting regions generated a positive EBITDA to

the Group.

The Group has several revenue streams with 90% of

revenues in the first half recurring revenues. The exception

is Establishment fees which are one off in nature. In

previous financial reports these one-time fees have skewed

the overall result but going forward the growth of the

Group’s revenue streams will be predictable and recurring.

Earnings Before Tax increased by 343% to $1.7m, albeit

given we will incur substantial intangible amortisation

charges for the next few years associated with the North

American acquisition. The Board has previously

communicated that EBITDA and EBITDA Per Share (‘EBPS’)

should be the primary measure of success and we are

pleased to deliver an EBPS result of $0.041 cents for the

first half.

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

H1 2015 H1 2016 H1 2017

A$

mil

lio

ns

Graph 1: Total Gross Debit Volume by Product Line (A$ millions)

Reloadable

Non-reloadable

Virtual Payments

A$194.0M

A$383.9M

A$1,930.2M

+97.9%

+402.7%


From a cash perspective, operating cash flow for the first

half was $9.6m, which includes previously accrued

breakage revenues in the PCP, which have largely

converted into cash, and we ended the half with cash on

our balance sheet of $31.8m, an increase of 18.1% and no

debt. We also invested an additional US$2.5m (AU$3.51m)

in the first half in PayWith Technologies LLC (‘PayWith’),

our Canadian technology partner that we are working with

on a number of programs including Caesars Entertainment,

Salary packaging programs in Australia and a number of

other opportunities. PayWith provides technology that

allows merchants to make mobile-based incentive offers to

consumers by way of either rebates or discounts, which is

aligned with our product suite given it encourages card

usage and provides a potential incremental revenue stream

for EML. We acquired an initial interest in PayWith with our

acquisition of Store Financial Services and this now brings

our total investment to US$3.5m, which corresponds to a

17% equity stake.

We also invested an additional $216,000 into the

expansion of our EachWay cash load product in Australia,

expanding the distribution network to be able to support

the launch of cash loads for Sportsbet and Ladbrokes in the

second half of this financial year, augmenting William Hill

and bet365 who are currently in market. Despite these

investments, the net cash position on our balance sheet

improved by $4.87m.

We remain interested in acquisitions where those

acquisitions would meet our established criteria of driving

incremental cash flow, gaining access to new markets or

segments and/or leveraging technologies, and whilst we

have continued to examine some acquisition opportunities

in the first half, none met these criteria. We will remain

open to the use of our cash on the right acquisition

opportunity and in using our cash on a program specific

basis to secure materially significant partnerships.

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

H1 2015 H1 2016 H1 2017

A$

mil

lio

ns

Graph 2: EBITDA by region (A$ millions)

Australia

Europe

America

A$0.54M

A$3.06M

A$9.96M

+471.7%

+225.8%

65.0%

70.0%

75.0%

80.0%

85.0%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

H1 2015 H1 2016 H1 2017

A$

mil

lio

ns

Graph 3: Group Revenue (A$ millions) and Gross Profit (%)

Group Revenue

Gross Margin (%)

A$5.1M

A$10.6M

A$32.4M

73.8%

76.9%

78.4%


A summary of our financial performance for the half-year is tabled below:

$ Millions

1H FY 2017

Growth on prior

comparative

6 months 1H FY 2016

Growth on prior

comparative

6 months

Revenue 32.44 207% 10.56 108%

Gross profit 25.43 213% 8.12 117%

Gross profit % 78% 1% 77% 4%

Other income

Research and Development tax offset 0.61 (39%) 1.00 43%

Overheads – employment related (10.54) 180% (3.78) 44%

Overheads – other (5.54) 140% (2.29) 78%

EBITDA* 9.96 226% 3.05 473%

Less: Research and Development tax offset (0.60) (39%) (1.00) 43%

Depreciation and amortisation expense (5.06) 146% (2.04) (452%)

Share-based payments (2.58) 269% (0.69) (268%)

Other non-cash charges 0.01 100% (0.00) (100%)

Profit/(Loss) for the period before tax 1.73 354% (0.68) (40%)

Income tax

(including Research and Development offset)

(0.35) 127% 1.31 87%

Net Profit for the period 1.38 119% 0.63 248%

* EBITDA is reconciled above and disclosed within the Directors’ Report and is equivalent to the net profit or loss for the period

excluding Share-based payments, Depreciation and amortisation expense, included within the Statement of Comprehensive

income and has been subject to review by our auditors.

Rounding off of amounts

The company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument

2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the directors’ report and the

half-year financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

Auditor Independence

The auditor’s independence declaration is included on page 8 of the half-year report.

Thomas Cregan

Managing Director and Group Chief Executive Officer

23 February 2017


AUDITOR’S INDEPENDENCE DECLARATION

23 Feburary 2017

Dear Board Members EML Payments Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence

to the directors of EML Payments Limited. As lead audit partner for the review of the financial statements of EML Payments Limited for the half -year ended 31 December 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and (ii) any applicable code of professional conduct in relation to the review.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

David Rodgers Partner Chartered Accountants


ABN 74 490 121 060

Riverside Centre

Level 25

123 Eagle Street

Brisbane QLD 4000 GPO Box 1463

Brisbane QLD 4001 Australia

Tel: +61 7 3308 7000

Fax: +61 7 3308 7002

www.deloitte.com.au

The Board of Directors EML Payments Limited 26 Commercial Road NEWSTEAD QLD 4006

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited


CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the half year ended 31 December 2016

Consolidated ($’000)

Notes 31 December 2016 31 December 2015

Revenue 2 32,440 10,560

Cost of sales (7,007) (2,439)

Gross Profit 25,433 8,121

Expenses

Employee benefits expense 10,540 3,772

Professional fees 1,670 724

Share-based payments 2,576 699

Depreciation and amortisation expense 5,057 2,066

Other expenses 2 3,858 1,536

Total expenses 23,701 8,797

Profit / (Loss) before income tax 1,732 (675)

Income tax (expense) / benefit 4 (348) 1,308

Net profit for the year 1,384 633

Other comprehensive income, net of income tax

Items that will be reclassified subsequently to profit or loss:

Unrealised foreign currency (loss) on translation of foreign operations (2,120) (118)

Other comprehensive income for the year, net of income tax (2,120) (118)

Total comprehensive (loss) / profit for the year (736) 515

Profit per share (cents per share)

Basic (cents per share) 0.57 0.67

Diluted (cents per share) 0.55 0.66

The accompanying notes form part of these financial statements.


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION For the half year ended 31 December 2016


Notes 31 December 2016 30 June 2016

Current Assets

Cash and cash equivalents 31,811 26,942

Trade and other receivables 7,929 4,621

Accrued Breakage 13,207 8,816

Receivables from financial institutions 55,234 17,058

Other assets 1,813 1,622

Total Current Assets 109,994 59,059

Non-Current Assets

Other receivables 878 605

Available-for-sale financial assets 6 4,929 1,418

Plant and equipment 3,196 2,209

Intangibles 7 64,871 71,408

Deferred tax asset 4 17,948 15,201

Total Non-Current Assets 91,822 90,841

Total Assets 201,816 149,900

Current Liabilities

Trade and other payables 18,062 8,757

Employee benefits 420 459

Provisions 743 581

Liabilities to stored value account holders 55,234 17,058

Total Current Liabilities 74,459 26,855

Non-Current Liabilities

Lease incentive 280 397

Deferred income 567 607

Employee benefits 82 100

Deferred Tax Liability 4 4,290 2,735

Total Non-Current Liabilities 5,219 3,839

Total Liabilities 79,678 30,694

Net Assets 122,138 119,206

Equity

Issued capital 8 138,114 138,043

Reserves 11,919 10,443

Accumulated losses (27,895) (29,279)

Total Equity 122,138 119,206



CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the half year ended 31 December 2016


Notes 31 December 2016 31 December 2015

Cash Flows From Operating Activities

Receipts from customers 24,653 6,621

Payments to suppliers and employees (15,819) (6,730)

Interest received 806 426

Net cash generated by operating activities 9,640 317

Cash Flows From Investing Activities

Payments for plant and equipment (1,356) (5)

Payments for intangibles 7 (179) (528)

Interest Paid - (10)

Investment in Available-for-sale financial assets 6 (3,353) -

Net cash used in investing activities (4,888) (543)

Cash Flows From Financing Activities

Proceeds from issue of shares 204 56

Net cash provided from financing activities 204 56

Net increase / (decrease) in cash held 4,955 (170)

Cash at beginning of period 26,943 4,264

Impacts of foreign exchange (87) -

Cash at end of period 31,811 4,094



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the half year ended 31 December 2016

$’000

Notes Issued Capital

Accumulated Losses

Other Reserve

Foreign

Currency Translation

Reserve

Total

Balance at 1 July 2016 138,043 (29,279) 12,757 (2,314) 119,206

Total comprehensive income

Profit for the period - 1,384 - - 1,384

Other comprehensive income:

- Unrealised foreign currency (loss),

net of tax

- - - (2,120) (2,120)

Transactions recorded directly in

equity

Share-based payments - - 2,576 - 2,576

Deferred tax associated with share-based

payments

- - 1,021 - 1,021

Issue of share capital 8 204 - - - 204

Issue costs (133) - - - (133)

Balance at 31 December 2016 138,114 (27,895) 16,354 (4,434) 122,138

Balance at 1 July 2015 70,228 (29,367) 9,552 2,171 52,584

Total comprehensive income

Profit for the period - 633 - - 633

Other comprehensive income:

- Unrealised foreign currency (loss),

net of tax - - - (118) (118)

Transactions recorded directly in equity

Share-based payments - - 699 - 699

Deferred tax associated with share-based

payments

- - 1,131 - 1,131

Issue of share capital 56 - - - 56

Issue costs - - - - -

Balance at 31 December 2015 70,284 (28,734) 11,382 2,053 54,985



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Significant accounting policies

Statement of compliance

The half-year financial report is a general purpose financial

report prepared in accordance with the Corporations Act

2001 and AASB 134 ‘Interim Financial Reporting’.

Compliance with AASB 134 ensures compliance with

International Financial Reporting Standard IAS 34 ‘Interim

Financial Reporting’. The half-year report does not include

notes of the type normally included in an annual financial

report and shall be read in conjunction with the most recent

annual financial report.

(a) Basis of preparation

The condensed consolidated financial statements have been

prepared on the basis of historical cost. Cost is based on the

fair values of the consideration given in exchange for assets.

All amounts are presented in Australian dollars, unless

otherwise noted.

The company is a company of the kind referred to in ASIC

Corporations (Rounding in Financials/Directors’ Reports)

Instrument 2016/191, dated 24 March 2016, and in

accordance with that Corporations Instrument amounts in

the financial report are rounded off to the nearest thousand

dollars, unless otherwise indicated.

The accounting policies and methods of computation

adopted in the preparation of the half-year financial report

are consistent with those adopted and disclosed in the

Company’s 2016 annual financial report for the financial

year ended 30 June 2016, except for the impact of the

Standards and Interpretations described below. These

accounting policies are consistent with Australian

Accounting Standards and with International Financial

Reporting Standards.

The Directors consider that the carrying amounts of financial

assets and financial liabilities recognised in the consolidated

financial statements approximate their fair values.

The Company is a listed public company, incorporated in

Australia and operating in Australia. The entity’s principal

activities are the provision of payment services.

(b) Adoption of new and revised standards

The Group has adopted all of the new and revised

Standards and Interpretations issued by the Australian

Accounting Standards Board (the AASB) that are relevant to

their operations and effective for the current half-year.

It has been determined by the Group that there is no impact,

material or otherwise, of the new and revised Standards and

Interpretations on its business and, therefore, no change is

necessary to Group accounting policies.

New and revised Standards and amendments thereof and

Interpretations effective for the current half-year that are

relevant to the Group include:

Amendments to IAS

16 and IAS 38 Clarification of Acceptable

Methods of Depreciation and Amortisation

IFRS 7 Financial Instruments:

Disclosures

Amendments to IAS 1

Disclosure Initiative: Presentation of Financial

Statements

AASB 2015-1

Amendments to Australian Accounting Standards

Annual improvements to

Australian Accounting Standards 2012-2014 Cycle

Amendments to IFRS 10, IFRS 12 and 28

Investment Entities: Applying the Consolidation Exception

Issued but not yet effective

AASB 9 Financial

Instruments Classification & measurement of

financial assets. AASB 9 was further amended by AASB 2010-

7 to reflect amendments for accounting for financial liabilities.

AASB 15 Revenue

from Contracts with Customers

Replaces all revenue

recognition requirements, including AASB 118.

AASB 9 Financial Instruments includes requirements for the

classification and measurement of financial assets. It was

further amended by AASB 2010-7 to reflect amendments

for financial liabilities. The effective date of this standard is

1 January 2018, however it is available for early adoption.

AASB 15 Revenue from Contracts with Customers was

issued by AASB in January 2015 and replaces all revenue

recognition requirements, including those as set out in

AASB 118. The standard contains a single model that

applies to all revenue arising from contracts, unless the

contracts are in the scope of other standards (e.g. leases).

The effective date of this standard is 1 January 2018,

however it is available for early adoption.

The directors of the Company anticipate that the application

of AASB 9 and AASB 15 in the future may have a material

impact on the amounts reported and disclosures made in the

Group’s consolidated financial statements. It is not practical

to provide a reasonable estimate of the effect of these

standards until the Group completes a detailed review.


Note 2. Revenue and expense

The following revenue and expense items are relevant in explaining the financial performance for the period.



(a) Revenue includes

Breakage income 19,166 4,901

Establishment fees 3,358 1,550

Transaction fees 8,969 3,594

Interest received – host based stored value 549 399

Interest received – group funds 256 27

Service fees 142 89

32,440 10,560

(b) Other expenses include

Risk & Compliance 341 250

Fixed sponsor bank & other related costs 253 53

Marketing & Advertising 248 122

Rent, Buildings & Office Management 826 330

Information Technology Related Costs 1,358 355

Travel & accommodation 795 457

Realised FX Gain/(Loss) 37 (31)

3,858 1,536

Note 3. Segment information

AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly

reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance.

The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating

segments, has been identified as the Board of Directors of EML Payments Limited.

The accounting policies of the reportable segments are the same as the Group's accounting policies. Following the acquisition of

USA based EML Payments USA, LLC on 1 June 2016, the group now operates in three geographic segments. The prior

comparative period has been restated to reflect this change. Information reported to the Group's chief operating decision maker

for the purposes of resource allocation and assessment of performance is focused on the geographic location of the business

operations. The Group's reportable segments under AASB 8 are therefore as follows:

• Australia

• Europe

• Americas (U.S.A. & Canada)

Segment EBITDA represents the gross profit earned by each segment, after cash overheads, inclusive of R&D tax incentive and

allocation of central administration costs and Directors' salaries, before share based payments, depreciation & amortization and

income tax expense. This is the measure reported to the chief operating decision maker for the purposes of resource allocation

and assessment of segment performance.


The following is an analysis of the Group's revenue and results by reportable operating segment for the half-years under review:

$’000

Six months ended 31 December 2016 Six months ended 31 December 2015

Australia Europe Americas Total Australia Europe Americas Total

Revenue 5,004 6,665 20,771 32,440 3,606 6,954 - 10,560

Gross Profit 3,608 5,718 16,107 25,433 2,829 5,292 - 8,121

Overheads (3,771) (1,978) (10,326) (16,075) (4,521) (1,542) - (6,063)

R&D Tax Incentive Offset 605 - - 605 997 - - 997

Segment EBITDA 442 3,740 5,781 9,963 (695) 3,750 - 3,055

Depreciation & Amortization (352) (2,593) (2,111) (5,057) (265) (1,801) - (2,066)

Intergroup transfers 1,490 2,284 (3,774) - - - - -

Add back:

R&D Tax Incentive Offset (605) - - (605) (997) - - (997)

975 3,430 (104) 4,302 (1,957) 1,949 - (8)

Share based payments (2,576) (699)

Other non-cash charges 6 32

Profit / (Loss) before tax 1,732 (675)

The following is an analysis of the consolidated entity's assets by reportable operating segment:

$’000

31 December 2016 30 June 2016

Australia 91,969 94,585

Europe 67,612 37,144

Americas 42,235 18,171

Total segment assets 201,816 149,900

Note 4. Taxation

(a) Recognised in the statement of Profit or Loss and Other Comprehensive income



Current income tax (benefit) (7) (290)

Adjustments for current tax of prior periods 483 317

Deferred tax expense relating to the origination and

reversal of temporary differences

477 (338)

Refundable R & D tax offset (605) (997)

Total income tax expense / (benefit) 348 (1,308)


(b) Reconciliation between income tax expense and pre-tax profit / (loss)

$’000


Profit / (Loss) before income tax 1,731 (675)

Income tax expense / (benefit) using the domestic

corporation tax rate of 30% (2016: 30%)

519 (202)

Tax effect of:

Prior year over/under adjustments 483 317

Non-deductible expenses & permanent differences (1,486) 438

Temporary differences not recognised as deferred

tax assets

- (696)

Refundable R & D tax offset (605) (997)

Effect of change in tax rates1 552 (168)

Amounts charged to equity 885 -

Income tax expense / (benefit) 348 (1,308)

1 United Kingdom corporate tax rate is 20%, Australian corporate tax rate is 30%, US combined federal & state tax rate is 38.62% and Canadian

tax rate is 26.51%.

(c) Deferred Tax Asset1

$’000

31 December 2016

Assets

30 June 2016

Assets

Employee Benefits 143 1,940

Share Capital Costs 827 1,369

Recognition of tax losses 12,020 7,103

Goodwill 4,066 4,079

Other 892 710

Deferred Tax Asset 17,948 15,201

1 Australian corporate tax rate is 30%

(d) Deferred Tax Liability1

$’000

31 December 2016

Liabilities

30 June 2016

Liabilities

Customer Contracts (733) (622)

Customer Relationships (251) (368)

Accruals (2,253) (1,689)

Other Receivables (1,053) (56)

Deferred Tax Liability (4,290) (2,735)

1 United Kingdom corporate tax rate is 20%.

The deferred tax assets and liabilities are not offset due to arising in different tax jurisdictions.


Note 5. Business Combination

On 1 June 2016, the Group acquired 100% of the net assets of EML Payments USA, LLC an unlisted entity based in the United

States and its subsidiary company Store Financial Canada, Limited (together SFS) from the shareholders of SFS.

SFS is a prepaid card program manager and payment processor in the US and Canada, largely focused on closed-loop shopping

mall card programs. SFS has recently expanded into B2B gift card programs, insurance payments and virtual/digital prepaid

programs. The Group acquired SFS because it provides the Company with a presence in the North American prepaid market

with demonstrable organic growth and a predictable financial contribution. The Group intends to leverage the Reloadable

technology and launch similar programs in North America.

The impact on the group results for the six months ending 31 December 2016 is shown within the segmental disclosure within note 3.

Further disclosure on the acquisition of EML Payments USA, LLC and its subsidiary company Store Financial Canada, Limited is

disclosed within note 7 of the Company’s annual financial report for the financial year ended 30 June 2016.

Note 6. Available for sale financial assets

$’000


Investment in Contrarian Holdings, LLC 76 74

Investment in Paywith 4,853 1,344

4,929 1,418

On 16 December 2016, the Group increased its investment in Paywith Worldwide, Inc. a company offering mobile reward

program technology, to a total of less than 20% of the issued ordinary share capital for cash consideration of US$ 2,500,000.

The Group holds less than 1% of the ordinary share capital of Contrarian Holdings, LLC, a company that manages employee

benefit group captives. The directors of the Company do not consider that the Group is able to exercise significant influence

over either entity. Available-for-sale financial assets are held at fair value with gains and losses included in other comprehensive

income. Financial assets that are not classified into any of the other categories (at FVPL, loans and receivables or held-to-

maturity investments) are included in the Available-for-sale asset category.


Note 7. Goodwill & Intangibles

$’000

Software

licenses

Customer

Relationships

Customer

contract Goodwill Total

Opening Balances at 1 July 2016

Cost 25,996 10,307 8,909 33,730 78,942

Accumulated amortisation (including accumulated impairment losses)

(2,348) (2,150) (2,282) - (6,780)

Accumulated effect of unrealised foreign

exchange differences

(2,182) 52 (32) 1,408 (754)

Net carrying amount at 1 July 2016 21,466 8,209 6,595 35,138 71,408

Additions 179 - - - 179

Disposals - - - - -

Amortisation (2,141) (812) (1,677) - (4,631)

Foreign currency translation adjustment (1,104) 1 (240) (742) (2,085)

Net carrying amount at 31 December 2016 18,400 7,397 4,679 34,395 64,871

Closing balance at 31 December 2016

Cost 26,174 10,307 8,909 33,730 79,121

Accumulated amortisation (including

accumulated impairment losses)

(4,489) (2,962) (3,959) - (11,411)

Accumulated effect of unrealised foreign

exchange differences

(3,285) 52 (271) 665 (2,839)

Net carrying amount at 31 December 2016 18,400 7,397 4,679 34,395 64,871

Opening Balances at 1 July 2015

Cost 2,988 2,056 6,842 28,595 40,481



(2,174) (1,259) (833) - (4,266)

Accumulated effect of unrealised foreign exchange differences

- 152 689 1,926 2,767

Net carrying amount at 1 July 2015 814 949 6,698 30,521 38,982

Additions 23,493 8,496 2,288 5,135 39,412

Disposals - - - - -

Amortisation (659) (1,135) (1,671) - (3,465)

Foreign currency translation adjustment (2,182) (101) (720) (518) (3,521)

Net carrying amount at 30 June 2016 21,466 8,209 6,595 35,138 71,408

Closing balance at 1 July 2015

Cost 25,996 10,307 8,909 33,730 78,942



(2,348) (2,150) (2,282) - (6,780)

Accumulated effect of unrealised foreign exchange differences

(2,182) 52 (32) 1,408 (754)

Net carrying amount at 30 June 2016 21,466 8,209 6,595 35,138 71,408

No impairment loss was recognised for the period ended 31 December 2016. Goodwill and intangible assets are assessed for

impairment at least annually or more frequently if events and circumstances dictate.


Carrying amount of goodwill, allocated to the cash generating units

Carrying amount of goodwill allocated to CGU ($’000)


Australia 10,777 10,777

Americas 7,139 6,938

Europe 16,479 17,423

Consolidated Group 34,395 35,138

As discussed in note 5, on 1 June 2016, the group acquired the net assets of EML Payments USA, LLC and its subsidiary

company Store Financial Canada, Limited. Total consideration paid was $46,545,873 with identified net assets at fair value

being $41,410,540. No items have been identified requiring adjustment from the original purchase price accounting assessment

undertaken as at 30 June 2016. Further disclosure is within note 7 of the Company’s annual financial report for the financial

year ended 30 June 2016.

Note 8. Issued Capital

$’000


245,311,323 fully paid ordinary shares

(30 June 2016: 242,419,862) 138,114 138,043

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to

the number of and amounts paid on the shares held. On a show of hands, every holder of ordinary shares present at a meeting

in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par

value and the Company does not have a limited amount of authorised capital.


No. $’000 No. $’000

Movement in issued shares

Balance at start of the period 242,419,862 138,043 184,537,219 70,227

Issued for cash - - 40,350,000 58,508

Share-based payments to Directors & executives1 267,553 - 363,636 -

Issued for consideration - - 7,903,710 11,460

Options exercised2 2,623,908 204 9,265,297 113

Costs associated with the issue of shares - (133) - (2,265)

Balance at end of the period 245,311,323 138,114 242,419,862 138,043

1 Share based payments:

167,553 fully paid ordinary shares were issued to Mr Bruce Stewart for exceptional performance, held in escrow until 23 August 2018.

The fair value of the award was $307,460 which will be amortised over the 2017 - 2018 financial years.

100,000 fully paid ordinary shares were issued to Mr Richard Anderson, General Manager of Sales for exceptional performance, held in

escrow until 23 August 2018. The fair value of the award was $183,500 which will be amortised over the 2017 - 2018 financial years.

2 Options exercised. The following options on issue were exercised during the period and issued for shares:

1,341,787 options expiring 30 September 2016, exercise price $0.40;

1,212,121 options expiring 30 September 2016, exercise price $0.00;

70,000 options expiring 18 November 2105, exercise price $0.56.


No.


Options over ordinary shares

Options on issue at beginning of period 16,534,121 17,812,121

Options issued during the period1 505,000 13,730,000

Options exercised during the period (2,623,908) (11,600,000)

Options cancelled during the period (872,530) (3,408,000)

Options expired during the period - -

Options on issue at end of period 13,542,683 16,534,121

Options issued during the year

(i) 257,500 Performance Based Options

On 8 December 2016, 257,500 options were awarded to selected EML Group employees with an exercise price of $nil. The

share options carry no rights to dividends or voting rights. The options will expire on 30 November 2018. The fair value of

the option grant using the Black Scholes Model was $368,740. A total expense of $11,996 was recognised in the statement

of profit and loss in the period in relation to the award of 257,500 performance based options.

(ii) 157,500 Performance Based Options

On 8 December 2016, 157,500 options were awarded to selected EML Group employees with an exercise price of $1.85.

The share options carry no rights to dividends or voting rights. The options will expire on 30 November 2018. The fair value

of the option grant using the Black Scholes Model was $59,640. A total expense of $1,940 was recognised in the statement


(iii) 90,000 Performance Based Options

On 8 December 2016, 90,000 options were awarded to selected EML Group employees with an exercise price of $nil. The

share options carry no rights to dividends or voting rights. The options will expire on 30 November 2018. The fair value of

the option grant using the Black Scholes Model was $128,880. A total expense of $4,193 was recognised in the statement



Date of Expiry Exercise Price Options Series No. No.

30 September 2016 $0.40 Series 9 - 1,650,000

30 September 2016 - Series 10 - 1,212,121

18 November 2016 $0.56 Series 11 - 70,000

18 November 2017 $0.56 Series 11 47,000 47,000

30 June 2017 - Series 12 481,666 500,000

30 June 2018 - Series 12 481,666 500,000

30 September 2018 $0.87 Series 13 125,000 125,000

30 September 2018 $0.87 Series 14 3,226,562 3,450,000

15 June 2017 - Series 15 886,666 926,666

15 June 2018 - Series 15 886,666 926,666

15 June 2019 - Series 15 886,668 926,668

30 September 2019 $1.45 Series 16 6,015,789 6,200,000

30 November 2018 - Series 17 257,500 -

30 November 2018 $1.85 Series 17 157,500 -

30 November 2018 - Series 17 90,000 -

13,542,683 16,534,121


Employee share trust

The Group established an equity-based compensation plan for employees which was approved by shareholders at an

Extraordinary General Meeting held on 29 June 2011. ESOP 2 is open to any person who is a full-time or permanent part-time

employee or Director of the Company or a related body corporate of the Company. Options may not be granted to a Director or

his or her associates under ESOP 2 unless approval of the grant is given by shareholders in general meeting in accordance with

the requirements of the ASX Listing Rules.

The Board has broad discretions under ESOP 2, including (without limitation) as to:

(i) the timing of making an offer to participate in ESOP 2;

(ii) identifying persons eligible to participate in ESOP 2; and

(iii) the terms of issue of options (including vesting conditions, if any).

The share options are not listed, carry no rights to dividends and no voting rights.

Since the current reporting period, the employee share option plan is also administered by the Emerchants Employee Share Trust.

Shares issued by the Trust to the employees upon vesting of options are generally acquired on market prior to the issue but

may be acquired via other mechanisms where necessary. Shares held by the Trust and not yet issued to employees at the end

of the reporting period are shown as Treasury Shares in the financial statements. The number of shares issued to the employee

is the number of options vesting by the closing market price at which the Company’s shares are traded on the Australian Stock

Exchange on that day.

Note 9. Key Management Personnel

Remuneration arrangements of key management personnel are disclosed in the annual financial report.

During the half-year, the following issued capital transactions occurred with key management personnel:

• 167,553 fully paid ordinary shares were issued to Mr Bruce Stewart for exceptional performance, held in escrow until

23 August 2018.

Note 10. Controlled Entities

Country of Incorporation Ownership Interest (%)


Parent Entity

EML Payments Limited2 Australia

Controlled Entities

Australasia Gold (SA) Pty Ltd1 Australia 100 100

EML Payment Solutions Limited3 Australia 100 100

Store Financial Services UK Limited United Kingdom 100 100

EML Payments USA LLC4 United States 100 100

Store Financial 2 LLC United States 100 100

Store Financial Canada Limited Canada 100 100

1 On 17 November 2016, an application was made to ASIC to deregister Australasia Gold (SA) Pty Ltd. ASIC confirmed that Australasia Gold (SA)

Pty Ltd was deregistered on 22 January 2017.

2 Following approval by shareholders at the Company AGM, application was made to ASIC to rename Emerchants Limited to EML Payments

Limited. ASIC approval was granted on 18 November 2016.

3 ASIC approval to rename Emerchants Payment Solutions Limited to EML Payment Solutions Limited was granted on 18 November 2016.

4 Following resolution by the board of managers on 19 January 2017, application was made to the Kansas Secretary of State to rename Store

Financial USA, LLC to EML Payments USA, LLC. Approval by the Kansas Secretary of State was granted the same day therewith.


Note 11. Contingent Liabilities

Estimates of the potential financial effect of contingent liabilities that may become payable:

Host-Based Store Value accounts with BIN Sponsors

A number of BIN Sponsors provide depository accounts to the Group to facilitate clients of the Group to deposit funds relating

to the provision of prepaid payment products. The BIN Sponsors have sole authority to transact on the licensee depository

accounts. Due to the fact that the Group does not have ownership or the right to direct operation of the depository accounts,

the account is not recognised as an asset in the financial statements of the Group.

Under the agreements:

(i) In consideration of the BIN Sponsors performing any Authorised Act, the Group will indemnify the BIN Sponsors and the

Directors, employees, officers, agent and independent contractors of the Bin Sponsors on demand from time to time; and

(ii) The Group is liable to the BIN Sponsors in respect of any debit balance of the depository account and in respect of any other

moneys owing or contingently owing by the Group to the BIN Sponsors under or in connection with the depository account.

Note 12. Financial Instruments

Overview

This note presents information about the Group’s exposure to credit, liquidity and market risks, its objectives, policies and

processes for measuring and managing risk, and the management of capital.

Exposure limits are reviewed by management on a continuous basis. The Group does not enter into or trade financial

instruments, including derivative financial instruments, for speculative purposes.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

Management monitors and manages the financial risks relating to the operations of the Group through regular reviews of the risks.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its

contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. At the

balance date there were no significant concentrations of credit risk.

Cash and cash equivalents

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have an

acceptable credit rating.

Trade and other receivables

The Group, where necessary, establishes an allowance for impairment that represents its estimate of incurred losses in respect

of other receivables and investments. Management does not expect any counterparty to fail to meet its obligations.

Exposure to credit risk

The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure

to credit risk at the reporting date was:

Carrying amount ($’000)


Cash and cash equivalents 31,811 26,942

Receivables from Financial Institutions 55,234 17,058

Bank Security deposits 452 423

Other receivables 7,929 4,621

Available-for-sale financial assets 4,929 1,418

Impairment losses

None of the Group’s other receivables are past due (2016: nil).


Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to

managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due,

under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group manages liquidity risk by maintaining adequate cash reserves from funds raised in the market and by continuously

monitoring forecast and actual cash flows. The Group does not have any external borrowings.The following are the Group’s

contractual maturities of financial liabilities, including estimated interest payments:

31 December 2016 ($’000)

Carrying

amount

Contractual

cash flows

6 mths

or less

6-12 mths

1-2 years

2-5 years

Non-interest bearing 18,062 18,062 16,929 1,133 - -

Payables to stored value

account holders 55,234 55,234 55,234 - - -

Total 73,296 73,296 72,163 1,133

30 June 2016 ($’000)

Carrying

amount

Contractual

cash flows

6 mths

or less

6-12 mths

1-2 years

2-5 years

Non-interest bearing 8,757 8,757 8,757 - - -

Payables to stored value

account holders

17,058 17,058 17,058 - - -

Total 25,815 25,815 25,815 - - -

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect

the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage

and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign

exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating

activities (when revenue or expense is denominated in a foreign currency) and the Group’s net investments in foreign subsidiaries.

The Company manages currency risk by ensuring that the operating revenue and expenses are incurred in the same currency

and the Company intentionally seeks to generate earnings in currencies other than Australian dollars. It is the policy of the

Group to enter into forward exchange contracts to cover specific material foreign currency exposures that will impact the

Group’s cash flow.

The Group has excess USD and GBP funds which are deriving no or low rates of interest revenue due to the low interest rate

environment for both USD and GBP deposits. To enhance the return, the Group has converted USD & GBP into AUD and

invested in term deposits. To hedge the exchange rate risk at maturity of converting the proceeds of the AUD term deposit back

into USD & GBP, the Group has fixed the AUD payable by entering into forward exchange contracts. These hedges have been

designated as cash flow hedges.

At 31 December 2016, the aggregate amount of losses under forward exchange contracts recognised in other comprehensive

income was $51k (31 December 2015: $nil). This amount was incurred in relation to foreign exchange contracts to hedge the

conversion of AUD back into USD or GBP to invest and earn interest on AUD term deposits.

At 31 December 2016, no ineffectiveness has been recognised in profit or loss for outstanding foreign exchange contracts (31

December 2015: $nil).

Foreign currency sensitivity

The sensitivity to a reasonably possible change in GBP, USD or CAD exchange rates, with all other variables held constant,

is immaterial.


Interest rate risk

The Group is exposed to interest rate risk (primarily on its cash and cash equivalents), which is the risk that a financial

instrument’s value will fluctuate as a result of changes in the market interest rates on interest-bearing financial instruments.

The Company does not use derivatives to mitigate these exposures.

The Group adopts a policy of ensuring that as far as possible it maintains excess cash and cash equivalents in short term

deposit at interest rates maturing over 90-120 day rolling periods.

Fair values versus carrying amounts

The Group’s financial assets and liabilities are included in the balance sheet at amounts that approximate fair values. The basis

for determining fair values is disclosed in the accounting policies as disclosed in the Company’s annual financial report for the

financial year ended 30 June 2016 in note 1(ad). The fair value at 31 December 2016 of derivative assets held for risk

management, which are the Group’s only financial instruments carried at fair value, was a net loss of $61k (2015: $nil) which

was recognised in other comprehensive income. These financial instruments were measured using Level 2 valuation techniques

as described in the fair value hierarchy shown in note 1(ad) of the Company’s annual financial report for the financial year

ended 30 June 2016. The Group does not have any financial instruments that are categorised as Level 1 or Level 3 in the fair

value hierarchy.

The fair values of financial assets and liabilities are equivalent of carrying value.

Capital Management

Capital is defined as the equity of the Group.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so as to

maintain a strong capital base sufficient to maintain future working capital. In order to maintain or adjust the capital structure,

the Group may return capital to shareholders, issue new shares or sell assets to reduce debt. The Group’s focus has been to

raise sufficient funds through equity to continue its operations. The Group monitors capital on the basis of the gearing ratio,

however there are no external borrowings as at balance date.

The Group encourages employees to be shareholders through Share Option Plans.

There were no changes in the Group’s approach to capital management during the year. Risk management policies and

procedures are established with regular monitoring and reporting.

The Group is not subject to externally imposed capital requirements.

Note 13. Subsequent Events

There has not arisen in the interval between the end of the financial half-year and the date of this report any item, transaction or

event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations

of the Company, the results of those operations, or the state of affairs of the Company, in subsequent financial periods.


Directors’ Declaration

The Directors declare that:

A. in the Directors' opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and

when they become due and payable; and

B. in the Directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act

2001, including compliance with accounting standards and giving a true and fair view of the financial position and

performance of the Consolidated entity.

Signed in accordance with a resolution of the Board of Directors made pursuant to s.303(5) of the Corporations Act 2001.

Peter Martin

Chairman

Brisbane

23 February 2017


INDEPENDENT AUDITOR’S REPORT

Independent Auditor’s Review Report

to the members of EML Payments Limited

Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of EML Payments Limited, which comprises the condensed

statement of financial position as at 31 December 2016, and the condensed statement of profit or loss and other comprehensive income, the condensed statement of cash flows and the condensed statement of changes in equity for the half-year ended on that date, selected explanatory notes and, the directors’ declaration of the consolidated entity comprising the group and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 9 to 25.

Directors’ Responsibility for the Half-Year Financial Report The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors

determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware

of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of EML Payments Limited, ASRE 2410 requires that we comply with the ethical

requirements that are relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in

accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Auditor’s Independence Declaration In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of EML Payments

Limited, would be in the same terms if given to the directors as at the time of this auditor’s review report.


ABN 74 490 121 060

Riverside Centre

Level 25 123 Eagle Street

Brisbane QLD 4000

GPO Box 1463 Brisbane QLD 4001 Australia

Tel: +61 7 3308 7000

Fax: +61 7 3308 7002 www.deloitte.com.au

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited


Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half -year

financial report of EML Payments Limited is not in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and of its performance for

the half-year ended on that date; and

(b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

DELOITTE TOUCHE TOHMATSU

David Rodgers

Partner Chartered Accountants Brisbane, 23 February 2017

EML ANNOUNCES EBITDA UP 226% TO $9.96 MILLION IN FIRST...

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